Tuesday, August 17, 2010

eBay founder to invest in more Indian social businesses

A non-profit venture fund set up by eBay founder Pierre Omidyar plans on spending more money in India. Pierre Omidyar and his Omidyar Network invests in companies that provide solutions or products that can improve the lives of the poor.

Similar to the Acumen Fund, Omidyar invests in the companies but doesn't demand a return on the investment. If the investment is successful and the money paid back, the money just gets invested again elsewhere.

From the Wall Street Journal's India Real Time, writer Amol Sharma talks about what Omidyar hopes will come from the investments.

Among the key areas the group plans to target in the future, Mr. Sinha said, are businesses that aim to bring poor people into the banking system, social media enterprises and technologies aimed at making government more transparent. He said the amount Omidyar Network commits will be “driven by opportunities,” but he expects deals worth $100 million to $200 million in five years.

“We’re looking for organizations that are going to have breakthrough impact, and are going to scale and touch millions of lives,” Mr. Sinha told India Real Time.

While in some ways it acts like a venture investor, Omidyar’s funding mechanism is purely philanthropic.

“Basically, we have access to Pierre’s checkbook,” Mr. Sinha said. “We have one source of permanent capital and that’s Pierre’s wealth. He’s very generous.”

That means there’s no time-horizon by which investments need to be made and no venture fund investors demanding a payoff. Profits from any investments—such as the sale of a portfolio company—are re-invested in philanthropic deals.

Mr. Omidyar, the French-born entrepreneur who founded eBay in 1995 and has a net worth estimated at over $5 billion, has become an active philanthropist along with this wife Pam in recent years.

The venture-meets-philanthropy model that Omidyar Network has followed is getting increasingly popular in developing markets. Acumen Fund, which calls itself “a non-profit global venture fund,” has more varied sources of funds than Omidyar’s organization but a similar approach to making investments. It targets sectors such as health, housing, water and energy.